“NO” on the Highway and Student Loan Bill
This week, the House and Senate will vote on the Highway and Student Loan Bill. The legislation reauthorizes various surface transportation programs through fiscal year 2014 at a cost of $120 billion and extends the 3.4% rate on Stafford loans for one year.
The transportation portion authorizes $53.3 billion per year in spending, $15 billion more per year than the plan proposed by House Republicans last July, which would have successfully “realigned” spending with revenues coming into the federal Highway Trust Fund (HTF). According to the most recent estimates, spending will outpace HTF revenues by nearly $16 billion per year. Congress should make the transportation program live within its means unlike the disastrous 2005 transportation bill that resulted in tens of billions in general fund transfers.
In their previous proposal, House Republicans recognized that “current program funding levels are not sustainable.” As The Heritage Foundation has said, effective reforms should begin “the process of recreating a federal highway program that provides better transportation services and cost-effective mobility at reduced levels of spending.” Although it includes some reforms on environmental streamlining and increases state authority, the deal as a whole abandons the “more with less” approach. It also strips out key language that would have required approval of the Keystone XL pipeline and language banning the Environmental Protection Agency’s regulation of coal-ash waste. The conference also chose to keep a Senate provision requiring the unnecessary and burdensome use of electronic logging devices in commercial motor vehicles.
To pay for the massive spending, the bill embraces a series of potential revenue increases and pay fors. Among the most egregious is a provision changing the rules for what interest rate corporations must peg their defined benefit pension contributions, allowing them to contribute less. This will increase the corporate profits the federal government is able to tax, but also threatens the solvency of already underfunded pensions and risks a larger taxpayer bailout of the Pension Benefit Guarantee Corporation. The offsets only serve to obscure the overspending; and to the extent the changes are deemed desirable, they would be best used for maintaining the solvency of the relevant programs and reducing our nation’s deficit, not bailing out highway and transit programs.
The offsets also go toward a one-year extension of the 3.4% interest rate on Stafford loans, which were originally lowered in 2007, as part of the new House Democrats’ 100-Hour Plan. The reduction was supposed to be temporary – only lasting 5 years. As is often the case in Washington though, there is no such thing as a temporary subsidy. Not only did the subsidies fail to stem the rising cost of a college education, the loans are also easily attained, thus increasing the likelihood taxpayers will be left on the hook when students default.
Maintaining the lower, taxpayer-subsidized interest rate will also cost taxpayers $5.9 billion for a one-year extension. The “benefit” would only apply to Stafford loans, and only to new borrowers who apply for the loans this year. And for that narrow group, it will only save them about $7 a month after they graduate. Often overlooked is that Stafford loans issued to undergraduates prior to the 2011-2012 school year were at a higher interest rate than 3.4%.
Heritage Action opposes Highway and Student Loan Bill and will include it as a key vote on our scorecard.
Heritage Action’s Scorecard
Key Vote Alert: “NO” on the Senate Transportation Bill
Key Vote Alert: “NO” on the House Transportation Bill
Key Vote Alert: “NO” on the Student Loan Bill (House)
Will Transportation Reauthorization Be Another Big Spending Boondoggle?
Big Dollars for Transportation
The Student Loan Side Show
Heritage: Assessing the President’s Proposals on Higher Education Costs
Heritage: The Rest of the Story on Student Loans
College (Loan) Football: The Looming Interest Rate Hike
“Turn Back” Transportation to the States